Is raising a child easier financially than ever before?

Conservative think-tank Fraser Institute says it's possible to raise child on $4K a year or less

The Canadian Press

Posted:
Aug 22, 2013 7:28 AM ET

Last Updated:
Aug 22, 2013 10:35 PM ET

The Fraser Institute says it's never been easier financially to raise a child in Canada, with the annual cost much lower than many believe, a finding criticized by some who argue the think-tank fails to account for the cost of daycare.

The conservative public policy institute, in a report released Thursday, says it is possible to raise a child on about $3,000 to $4,000 a year, and even less if parents only include necessary expenses and are careful with their dollars.

That is a far cry from some studies that have put the annual expense per child in the $10,000 to $15,000 range — with the total bill for raising a child to age 18 at more than $200,000.

However, the Fraser Institute's paper says the higher numbers are discouraging for lower-income Canadians, who might come away with the conclusion they cannot afford to have children.

But many lower-income people can and do raise healthy children, says the paper, authored by economist Christopher Sarlo.

Sarlo concedes his lower estimate is based on the cost of providing a child's essential needs, such as food, clothing, personal care, household supplies, recreation and school supplies.

Calculation excludes daycare

Very few frills are included in the Fraser total, including no allowance for daycare or lost income if one parent decides to stay home to take care of the children.

Sarlo said the exclusion of daycare is not because it is not a legitimate expense but because the majority of parents have zero child-care costs, saying the item is best treated as a special expense for families for whom it applies. That cost alone, however, would more than double the Fraser annual estimate for those families.

The report says the cost of daycare can be reduced to little or none when a pre-school child is cared for by one parent who decides to stay home or by a close relative. Some parents may also have free daycare at work.

For school-aged children, there are a number of low-cost or no-cost options for parents, according to the report. Also, children older than 10 or 11 typically do not require any kind of daycare.

However, Don Giesbrecht, CEO of the Ottawa-based Canadian Child Care Federation, said the institute's measurement is out of line with the reality faced by many Canadian families.

"Families are absolutely stretched to their financial maximum," he told CBC News.

According to Giesbrecht, 70 per cent of Canadian moms are in the workforce, making childcare a necessity for many families.

“I don’t see how someone can talk about the cost of raising a child without talking about the cost of childcare,” she said.

The paper also notes that some affluent parents no doubt spend plenty of money on their children — for music lessons, trips to Disney World, expensive clothing, elaborate toys and games, and on education, including private school.

'The complexity around family finances is more than splitting up between adults and children. It’s a household issue.'— Nora Spinks, CEO of the Vanier Institute of the Family

But these expenses are not needed in order to raise a healthy child at socially acceptable standards, the paper argues.

In truth, Sarlo says, it has never been financially easier to raise a child in Canada because the necessities represent a smaller portion of family income, real incomes are higher, there are more dual income families, and couples are having fewer children than ever before.

But Giesbrecht suggests that Canadian parents need to review the report with caution, and be realistic about the real cost. Many families, struggling with debt, are delaying having children until they become more financially stable.

"It's a harsh reality for many," he said.

Nora Spinks, CEO of the Vanier Institute of the Family, said parents should look beyond the specific costs and approach their spending as an investment in the next generation. They also need to appreciate the complexity of family finances and be more financially literate.

“The complexity around family finances is more than splitting up between adults and children. It’s a household issue,” she said.